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Tax Granade

THE PROBLEM WITH TAXATION

Taxes are always downplayed or explained away as a "Robin Hood" process; steal from the rich and give to the poor. Who can be against this? Well… we for several!

With this kind of propaganda is no wonder that anybody speaking against taxes has a difficult time doing so. The idea is that anybody being against taxation is either a rich person or is being paid by a rich person. And you know what? This is correct, at least in part. Lobbyists for rich people do exist. They are not a figment of your imagination. However, most people are missing the point while watching the fireworks. Yes, lobbyists do exist and yes they do advocate for their rich clients.

So what?

Precisely.

Look, allow us to offer you an analogy. Do you want your food to be genetically modified? No, right? Did you know that in many countries farmers hired lobbyists to push governments to forbid GMO's because their farms could not compete with GMO yields and they did not want to pay GMO companies for GMO seeds? However and from your perspective, do you actually care what those farmers did and why they did it? Of course not. It so happens that your and their goals align. The fact that they hired lobbyists is utterly irrelevant. Well, same with rich people lobbyists. Their existence is utterly irrelevant because their goals and your goals align even though you don't know it!

How so?

Keep reading. So.

AS EXPLAINED

We have explained with numbers what are the effects of taxation in the article You The Tax Collector and we have explained the theoretical basis for it being so in the article How Taxes Destroy Capital And Why This Is Bad. The summary of both is simple, taxes destroy capital in the first place (by transforming it into consumable resources) and the chain reaction this triggers has a ripple effect on the market structure whereby the market deviates from fulfilling our needs.

That much is a given. If you prefer details, please feel free to read those articles.

LINEAR AND NON-LINEAR TAX DAMAGE

Here is where we come full circle. It so happens that taxation level increases (as publicized by governments) are linear. This, we can understand. However, the full damage of taxes in the economy is non-linear, this we have a hard time understanding. Not to mention the fact that there is very little precious data about this subject because it is a very inconvenient truth and politicians do not commit political suicide. The following graph outlines those ideas.

Taxation Damage

As you can see the real amount of devastation caused by taxes is non-linear and it is for this reason that we have a hard time understanding it.

NON-LINEAR ECONOMIC GROWTH

Yet another piece of information that we have a hard time understanding is that in a free market economic growth is non-linear. Take a look at the graph below.

Free Market Economic Growth

The green line represents what happens in a free market. But as you know, we do not operate in a free market but in a managed market.

REAL ECONOMIC GROWTH

Taxes (in all their forms) are anti-economic forces or, put it in a different way, anti-growth or negative growth. As such it is possible to visualize them by taking the above plot and reversing it (i.e. changing the sign of its values).

Growth, on the other hand, is growth. But if we have growth and negative growth happening simultaneously in the same place, we should be able to get an idea of the final result by subtracting one from the other. This is what we did in the graph below.

Real Economic Growth

The final economic growth that we obtain can be seen represented by the Green line. As you can see it is far, far smaller than the Blue line which represents pure free market growth. Yet, this Green line is still non-linear and for this reason difficult to grasp.

ABOUT IMMOVABLE OBJECTS AND IRRESISTIBLE FORCES

Every day we can see the effects of this war, between damage caused by taxation and the natural tendency of the economy to grow. However, more importantly, we are bombarded every day with idiotic economic concepts that pretend that tax damage either does not exist or is minimal. As such we hear that the "economy is growing" or the "economy is recovering" or that the "economy is in recession" or many other nonsense. We must never forget that what they refer to as "the economy" is the outcome of two opposite forces: taxes and growth. At any given time one or the other may win, however over very long times growth always wins. This is so because growth is natural and ever present while taxation is artificial and its imposition must be maintained all the time through brute force.

  • Taxation damage must be seen as the immovable object because it is the cornerstone of politicians' power. Never forget, no spending no job.
  • Free Market growth must be seen as the irresistible force because it is the natural trend and as far as we know, nothing can resist nature forever.

FORCE MULTIPLIER

We like this term as used by the military with all its connotations (and downright definitions) applicable to death. This is exactly what taxes are; a force multiplier for economic death.

Taxes significantly increase the destructive economic potential of governments and thus enhance the probability of successful job retention by politicians. F&P

Why is this so? Because the worse economies are doing, the more addictive socialism becomes (see Socialism - The Most Addictive Drug) because the more desperate people become. And desperate people will do just about anything to get relief. Want an example? Sure. How about Hitler? Hitler was the peoples' choice to get them out of hyperinflation and total economic obliteration.

Let's be clear. We are not saying that politicians deliberately unleash the destructive power of taxes nor are they seeking economic destruction. They do not. Any politician would be more than happy reigning over a rosy economic situation while at the same time being able to spend large amounts of money. The problem is that one is not compatible with the other and their first priority is to spend. Thus, they unleash said destruction by default. The destructive force multiplication of taxes is a side effect which, we are absolutely sure, they are not even aware of its existence. After all, they are human too and they think in linear terms only… assuming they think… which is always a risky proposition.

BUT THE ECONOMY IS DOING OK!

And then we always have the same comment; "the economy is doing OK". Sooner or later somebody somewhere will say that if the destructive power of taxes is so strong how is it possible that their economy is doing so well even within a socialist taxation system. And the answer is simple. No two countries have the same taxation system. Some taxation conspiracies are less destructive than others. Some countries have low taxes but then politicians compensate by borrowing more with the net effect of pushing economic problems into the future. Some economies are less damaged than others. And so on. Thus, when you put all this together there will be scenarios and circumstances in which economies will be doing OK. That is not and it never was the point.

  • The point is that in overall, world-terms, economies are being systematically damaged preventing them from reaching their full potential.
  • The point is that this missed potential is not negligible but overwhelming.
  • The point is that our future is being destroyed systematically despite our best efforts.
  • The point is that governments and politicians are sinking us into a new dark age of permanent despair and cyclic crises; a cycle that cannot be broken by means of existing political and economic tools, demanding an extreme approach.

Don't believe us? Take a look at the article Argentine Default - What A Depression Looks Like. That's your future and the future of all humankind. Happy now?

CONCLUSION

Taxation acts as force multiplier when it comes to its economic destructive power. A few unsuspected taxes have real impacts several times higher than linearly anticipated. This is so because their impact is non-linear. We can't see this happening because:

  1. We don't have the data and governments sure as heck are not interested in providing it
  2. We have a hard time imagining non-linear events (in this case exponential)

This leads us to two conclusions:

  1. We must train ourselves to get a grasp on non-linear tax effects to understand their destructive power
  2. We must strive to evolve into an extreme system which does not include governments

And that's pretty much it!

From here on it is your choice. You may choose to have blinders on and blindly follow your government into a blind alley or you choose to relieve yourself of their burden. Its your choice. Our advice? Think carefully and think it through.

Note: please see the Glossary if you are unfamiliar with certain words.

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